To many people, the cryptocurrency industry is one big mystery. Nonetheless, more people are gaining interest and trying their luck by putting money in the digital currency market.
Historically, the stock market has been hailed as the most significant long-term wealth creator. On average, stocks generate a 7% annual return, which is inclusive of dividend reinvestment and adjustment for inflation. Investors can double their initial investment in about a decade with the stock market, which is remarkable.
With cryptocurrencies, the deal is even better. In several instances, investors in virtual currency have made exponential gains in less than a year.
However, before you join the digital currency craze, you may consider going through this primer on the 6 must-know facts about cryptocurrency.
#1 The total amount of cryptocurrency is limited
The supply of crypto is limited; you can’t buy an endless amount no matter how much money you have at your disposal. Just like oil, gold, and of course, money, cryptocurrency is a limited resource. This explains why some cryptocurrencies, such as Bitcoin, have been experiencing exponential growth in value as the supply decrease. Investors are aware that the number of available Bitcoin and other cryptos will decrease and eventually come to an end at some point. Notice the forces of demand and supply will dictate the prices of cryptos in the future.
#2 There are nearly 10 000 cryptocurrencies
With so many people interested in getting a share in the cryptocurrency market, new currencies are popping up daily.
There are about 10 000 cryptocurrencies in the world today. Some of these currencies have little value, and they will most probably not be worth much even in the future.
However, Bitcoin seems to be the diamond in the rough — it was the first tradable crypto, and it currently makes over a third of the aggregate cap of all cryptocurrencies.
One thing is sure: we are all spoilt of choice in deciding which cryptocurrency to buy.
#3 Cryptocurrencies are highly volatile
If you have been keenly following crypto, you must have noticed that they experience deeps and rallies within short periods. This can be explained by the fact that the trading of cryptos is executed on diverse cryptocurrency exchanges as opposed to a central exchange.
Notably, the aggregate market cap of all cryptocurrencies increased to over $3 trillion in November 2021 but has since reduced to slightly above $2,300,000 in January 2022. Moreover, Bitcoin, the most traded cryptocurrency, has had over 4 major corrections over the last 12 months. Ultimately, the crypto world is not for the faint-hearted. Be ready for the random highs and lows.
#4 China is the biggest cryptocurrency miner
The mining of cryptocurrency is where the real value lies. In this case, mining is the process of verifying and enlarging transactions before they are put in the blockchain’s ledger. Cryptocurrency mining entails using high-powered computers to get solutions to complex mathematical equations to verify and log transactions. The process is competitive, and miners are rewarded with cryptocurrency coins.
Mining is highly lucrative, and China controls over 75% of all crypto mining.
#5 They’re taxable
Of course, you got to pay taxes depending on your country. As cryptocurrencies continue to gain acceptance in the mainstream market, more tax agencies across the world are trying to get their share of the virtual cake. Most countries expect you to remit tax on profits you make from your cryptocurrency portfolio. For example, in Romania, a 10% flat rate is levied on gains from virtual currency transactions. You might consider double-checking the tax laws in your country to be safe.
#6 Cryptocurrencies are banned in some countries
Sure, cryptocurrencies could be the second biggest invention since sliced bread, but does everybody accept them? Given the decentralized and unregulated nature of the crypto trade, some countries have chosen to ban the use and trading of cryptos.
But is it possible to physically ban cryptocurrencies? Well, it is an impossible undertaking. Any person can get a crypto wallet. Indeed, countries can make laws on cryptocurrency, but the crypto market cannot be banned. Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, Bangladesh, and China have entirely banned cryptocurrencies, while 42 other countries have instituted limitations on crypto exchanges.
Armed with these facts, you need to work with a reliable exchange platform to help you steer your investment journey towards success. Register on IXFI today and put your knowledge to good use. Your Friendly Crypto Exchange has your back.
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